Supply and Demand Supply and demand define as the amount of commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price (Dictionary, n.d.). Netflix is having a small price for entertainment and the public wanting something different than regular cable. In order words, if there are low supply and high demand the price would likely increase, however, if the amount is greater with lower demand the price would probably drop. As for Netflix and its supply and demand conditions like other business on the market, it is vulnerable to the supply and demand stress. Considering that much companies offer streaming content within the same price range as Netflix, for example, Hulu, Amazon Prime, …show more content…
Netflix plans to spend a hefty 7 billion on content marketing and development cost in 2016 (Wu, 2016). About 5 billion of that money going to content value alone this is double the amount they spent in 2015. Part of these funds would go to the international costumers allowing Netflix to create appealing stories from various background to all people across the world. Thus, paving the way for the global market to become profitable in the years to …show more content…
As a result, Netflix services are elastic, and the prices are raised, the quantity of memberships will go down a significant amount (Edgeworth Economics, 2011). If the membership goes, too high consumers could substitute their choice and switch to another competitor with a lower price. Thus, bring the fear that Netflix has felt all this time with an increase in price this could create conditions were streaming entertainment is seen as luxury items and is expendable in consumers budgets. Seeing, that this product is not viewed as a necessity, such as food, shelter, and transportation making this the first then to go if consumers have less disposable income. When customers see the fear of an increase in price once viewed as an affordable luxury, could now turn into an expensive item that needs to drop to make room for other necessity items. Since 2011, the price of Netflix membership has increased by 40%. As a result, Netflix is losing close to 800,000 memberships (Pepitone, n.d.). The price increase was a result of Netflix needed to spend more money to license additional material for its streaming services (Wingfield & Stelter, 2011). Netflix figured that the increase would not have caused that much backlash against the company, it would have been
? Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenues.
Cable companies spend billions of dollars each year on items such as infrastructure costs, programming costs, technology development costs, mergers and acquisitions, and interest costs (mentioned in Section 3). Typically, the cable markets companies have no choice but to pass on the costs to consumers. However, as identified in Section 2, the demand for cable industry products is elastic, stemming from the fact that consumers are extremely price sensitive; increasing costs could hurt Comcast’s growth and ability to remain retain customers.
“Stock of the online DVD rental company was up more than 15% in early morning trading Thursday. Netflix increased their forecasts for both revenue and total subscribers today, trying to compete with powerhouses like Blockbuster and Wal-Mart. The increased forecast stems from a slew of new subscribers that have invested in the service after a price decrease from $21.99 to $17.99 last month. Despite the increases in revenue and subscribers however, some analysts feel that the business model is “fatally flawed” and the company may fall by the wayside due to competition from the aforementioned retail and entertainment powerhouses.” Investors Guide reported this.
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
Companies like Amazon and Netflix are very effective in predicting what customers normally buy and watch. Knowing what your customers are or are not buying will allow you to position products that they are statistically likely to purchase based on recent transactions and activity. This is a powerful tool for Netflix because it keeps users engaged and actively using the service but also allows them to tailor their investments in content towards items that are more likely to keep users active on their site.
Netflix first grabbed the attention of many customers when, unlike the local video rental store, they eliminated due dates and late fees charged by traditional video rental stores. The Netflix model allows customers to pay a monthly subscription fee for which they receive as many movies as they want in a month. The subscribers order DVD’s via the firms website and delivered through the United States Postal Service. Subscribers keep the movie as long as they want and when finished return it to Netflix in a postage paid envelop.
From its inception, Netflix has become a business based on superior customer service and has subscribed its business to the market marketing management philosophy. The main purpose behind Hasting’s idea of a better way to rent and enjoy movies was how to provide that service to their clients and not have any late fees. In other words, their customers could enjoy their rentals from Netflix for as long as they wanted, and they would never have to worry about late fees again, so long big movie rental chains! This aspect alone of Netflix’s marketing plan indicates that Netflix has based their marketing plan on market orientation, “a philosophy that assumes that a sale does not depend on an aggressive sales force but rather on a customer’s decision to purchase a product,” (Lamb, 2009, p.7). Many companies that take on this philosophy are said to implementing the market concept. The marketing concept states: “The idea that social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting orga...
Reed Hastings, co-founder of Netflix headquartered in Los Gatos, CA, began the company’s operations in 1997 after receiving an enormous late charge from a movie rental he returned long overdue. However, Hastings had the desire to be different than traditional movie outlets; whereas, customers had to drive to the location, pay a certain amount for each movie they rented, and were given a deadline in which to return the movie. Instead of using a method established by other video markets “to attract customers to a retail location, Netflix offered home delivery of DVDs through the mail” which eventually led to a booming business towards streaming forms of entertainment (Shih, Kaufman, & Spinola, 2009, p. 3). Today, Netflix exists along with several competitors; however, offers the most streaming content available for viewing, and continues to grow its subscriber base both domestically and globally. Although, direct and indirect competitors, acquisition costs, and several barriers present a financial threat for Netflix, the company has managed to grow with the acclamation of partnerships, expand to international territories, and vastly increase its price in shares of stock.
As the firm moves forward, top managers must pay attention to staying unique to sustain a competitive advantage. Netflix does not own their content, nor do they have any tangible assets. Netflix is a part of a broad range of network users. As technology continues to grow exponentially, Netflix will have to be readily adaptive to change and innovation. Technology never stops growing and evolving, therefore, Netflix’s business platform should never stop growing and evolving. At the same time, they must be careful to remain user friendly and customer centric by keeping the technology at a level where users will not have to obtain a certain set of technological skill sets.
Video Rental and Streaming has partly been of the most significant avenues of the general home entertainment industry in the United States for many years. It promotes constructive development through various channels such as Information Technology, Public Multimedia and it also has a huge impact on people’s lives and their entertainment on demand. One of the best companies which provide this high-advanced service is Netflix, Inc (Netflix). It was incorporated on August 29th in 1997 in California by Reed Hastings & Marc Randolph; listed on NASDAQ as NFLX in 2002. Netflix is the world’s largest Internet subscription service streaming television shows and movies with over 40 million members in 40 countries (Netflix, 2013).
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
According to the Federal Communications Commission, expanded basic cable rates have increased at a rate of approximately 6% per year since 1995. This is double the Consumer Price Index of 2.9%, and does not include charges for equipment, fees and taxes. Therefore, if cable prices continue to rise at double the rate of other consumer goods, it stands to reason that more shoppers will consider alternative sources for their video entertainment. ("REPORT ON CABLE INDUSTRY PRICES"
There is strong competition with other companies that offer video streaming at no extra charge. Additionally, Netflix and its competitors are attempting to enter the digital world. Digitally offering television shows is an area of competition that has previously been controlled by
... this and their marketing strategy will be key if they are to remain viable, grow and compete in the market.
How does Supply and Demand work? First, you have to know what Supply and Demand stands for. Supply is a good or product that is provided to a person at a certain price. Demand is the desire of a consumer to pay a price for a certain good. The Non-Price determinant of Demand is measured by Taste, Income, Market size, Expectation and Related goods also known as T-I-M-E-R. Supply is measured by Technology Inputs, Government regulations, Goods, Expectations, Rate, and Number of sellers and is referred to as T-I-G-G-E-R-S.